Apple posts record India sales in tough October-December quarter

Apple's sales in India rose to a record in the October-December period thanks to a wider distribution base, discounts and installment and buyback programmes.Gulveen Aulakh | ET Bureau | January 21, 2016, 08:09 IST

Apple's sales in India rose to a record in the October-December period thanks to a wider distribution base, discounts and installment and buyback programmes, which made consumers happy but displeased some retailers.

The company shipped a record 800,000 devices to India in the three-month period, historically the strongest quarter for Apple, according to data from Counterpoint Research and Cybex.

That’s up from the previous high of 500,000 in the year-earlier quarter. This was despite a slowdown in the second half of the quarter - as many as 500,000 of the pieces were shipped by November 15.

"Apple sell-in for Q4-15 was over 0.8 million, the best ever for Apple," said Tarun Pathak, senior analyst at Counterpoint. "The initial sales were hurt by steep pricing and the overall portfolio pricing wasn't as stable as compared to a year ago.” He added that more than 90% of Apple shipments get sold.

Apple had to entice buyers with various promotions after high prices for the iPhone 6s and 6s Plus dented enthusiasm. Those measures helped revive sales. The company had expanded its distributors to four from two at the start of 2015.

Analysts said the iPhone 5s comprised a substantial 30% of the shipments. The 6s and 6s Plus accounted for a lower-than-expected 50% in the October-December period. That compares with the 70% share that 2014 flagship iPhone 6 contributed in the same period of previous year. That may explain why some retailers have seen net sales of Apple devices dip from a year back. Apple didn't respond to ET's emailed questions.

Extrapolating from the quarterly numbers, this will likely be a record year for Apple, improving upon the 1.7 million devices shipped in the fiscal ended September 2015. India has assumed greater importance for the company amid a slowdown in smartphone sales the world over. In this regard, ET reported Wednesday that Apple has sought permission to open its own stores in India.

Cybermedia Research has predicted that smartphone sales will grow 37% in 2016, higher than the 32% average sales growth in the last three years. Competition has increased with a profusion of brands, many of them Chinese, to choose from.

Last year, high prices for Apple's new phones had led to lacklustre demand, especially after Diwali. That forced it to drop prices by nearly 16% in offline trade channels within an unprecedented two months of the 6s and 6s Plus launch. The company also cut prices of its best-selling model, the 5s, for the third time in three months to shore up volume in the crucial quarter.

While the distributor-driven price cuts have made Apple popular among consumers, retailers are disgruntled, saying they're paying the price for the company’s push to boost the numbers. They complained about price volatility among various distributors across iPhone models.

"We have never had an issue like this in previous years but this time, in 2015-end, we've not made money like we used to make," said a top executive at a large format retail chain. He added that net sales from the Apple portfolio has fallen 5-6% from the year earlier, due mainly to price drops and comparatively muted demand for the latest devices.

Freeing up distributor pricing has hit some retailers, prompting them to raise the issue with Apple. The company hasn’t offered any solutions, they said.

"Earlier, we would be sure that an iPhone price will remain the same throughout most part of the year and discounts would happen towards the end of its lifecycle," said a senior executive at another leading retail chain. "This time, it has changed completely. We don't know what the price will be tomorrow."

The bigger retail chains are more susceptible to price volatility, because they buy in bulk, than smaller stores that can buy from any distribution channel, including online, limiting exposure.

For that reason, some retailers have started ordering limited stocks that they are confident of selling, said a senior executive at another large retailer.

However, channel partners said such volatility was part of the business and that ups and downs in sales among retailers were cyclical, much like Apple's global sales - rising in the quarters toward the beginning of its fiscal year.